Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — 9M FY21 Earnings Presentation
59 slides from Hdfc Life Insurance's earnings presentation, 2021
Slide 1: HDFC Life Insurance Investor Presentation – 9M FY21
HDFC Life Insurance Investor Presentation – 9M FY21
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Managing Covid-19 4 Customer Insights 5 Annexures 6 India Life Insurance Page 2
Slide 3: Performance Snapshot
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 1 Performance Snapshot
Slide 4: Executive summary: 9M FY21
Executive summary: 9M FY21 Revenue growth and Expansion in market share1 by 214 bps from 14.3% to 16.4% Market share Individual WRP grew by 19% in Q3. 8% growth in 9M FY21 v/s private industry de-growth of 6% Balanced product mix2 (UL: 23%, Par: 35%, Non-par savings: 30%, Protection: 7%, Annui
Slide 5: Demonstrating resilience in the current environment (1/2)
Demonstrating resilience in the current environment (1/2) Improving MoM business trends1 Expanding market share1 Rs Bn. -19% 22% 19% 8% 63% 17% 24% 31% Growth HDFC Pvt Industry Life sector 9M FY21 8% -6% -8% 42.6 46.1 9M FY20 31% 16% 17% 16.4% 18.0 14.3% 2 year 13.2 14.3 17.4 15.1 19% 5% 4% 10.7 CAG
Slide 6: Demonstrating resilience in the current environment (2/2)
Demonstrating resilience in the current environment (2/2) Focus on diversified channel mix1 Steady expansion in VNB margin Rs Bn. New Business Margins (NBM) 14% 19% 19% 22% 11% 5% 13% 12% 14% 4% 6% 9% 71% 24.6% 25.9% 25.6% 24.3% 25.6% 26.4% 64% 63% 55% _ FY18 FY19 FY20 9M FY21 FY19 FY20 9M FY21 Q1 F
Slide 7: Our Strategy
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 2 Our Strategy
Slide 8: Key elements of our strategy
Key elements of our strategy 1 2 3 4 5 Focus on profitable Diversified Market-leading Reimagining Quality of Board growth distribution mix innovation insurance and management Ensuring sustainable Developing multiple Creating new product Market-leading digital Seasoned leadership and profitable growt
Slide 9: Focus on profitable growth
Focus on profitable growth 9M 9M FY18 FY19 FY20 Rs Bn. Profitable FY20 FY21 growth New business Margin 23.2% 24.6% 25.9% 26.6% 25.6% Economic Profit Value of new business 12.8 15.4 19.2 14.1 14.1 distribution mix Diversified Profit after tax (PAT) 11.1 12.8 13.0 9.8 10.4 Accounting Profit Underwriti
Slide 10: Analysis of change in IEV
Analysis of change in IEV1 Rs Bn. EVOP – 27.8 Profitable EVOP1% - 18.3% growth 0.5 250.5 15.7 14.1 0.8 206.5 12.9 ESOP Operating Economic exercises distribution mix Post over- variances variances Diversified Unwind run VNB 161.3 134.6 Adjusted Net worth (ANW) Value of in-force business (VIF) innovat
Slide 11: Diversified distribution mix
Diversified distribution mix enabled by Strong partnerships Focus on proprietary channels Profitable growth – Strong network of 250+ traditional partners and brokers - Building a structurally solid agency channel: focus on building a strong and quality workforce along with increasing FLS productivit
Slide 12: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life <25 years 26-35 years 36 – 50 years 50+ years Risks Addressed Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off mortgage Mortality distribution Diversified Medical care mix Morbidity First Job Medical care Net Wor
Slide 13: Expanding market through consistent product innovation
Expanding market through consistent product innovation Group Poorna Suraksha Guaranteed returns, with Comprehensive protection plan Profitable growth Retirement option for life long income offering multiple choices of & pension benefits under group platform Woman FY15 FY17 FY18 FY19 FY20 FY21 distri
Slide 14: Our approach to retiral solutions
Our approach to retiral solutions Opportunity to grow the retiral corpus1 by 3x between FY20-25 Profitable growth 1. NPS 2. Individual income plans 2 ▪ Ranked #1 with AUM of Rs 139 bn amongst ▪ Providing long term retiral solutions private owned Pension Fund Managers ▪ Registered strong AUM growth o
Slide 15: Product mix across key channels
Product mix across key channels1 Segment FY18 FY19 FY20 9M FY21 Segment FY18 FY19 FY20 9M FY21 UL 33% 26% 12% 9% Profitable UL 64% 64% 32% 26% growth Par 48% 40% 34% 38% Agency Par 25% 13% 18% 37% Banca 2 Non par savings 8% 17% 44% 30% Non par savings 5% 17% 40% 36% Term 3% 4% 4% 5% Term 11% 12% 12%
Slide 16: Simplifying the customer journey using building blocks
Simplifying the customer journey using 5 building blocks Profitable growth Journey Partner Service Data Enrichment Platforms and Simplification Integration Simplification and Analytics Ecosystems Customer sales journeys Products and services built on Simplified solutions for Continuous improvement i
Slide 17: Journey simplification - short journeys for specific requirements
Journey simplification - short journeys for specific requirements Profitable growth distribution Diversified mix innovation Market- leading Reimagining insurance management Board and Quality of POSP Journey LifeEasy – Protection Journey InstaSIP – ULIP Journey 17
Slide 18: Partner & Corporate Portals for smooth partner integration
Partner & Corporate Portals to ensure smooth partner integration Profitable Customer servicing: growth Availability of servicing tools on the portal to ensure service on the go distribution Diversified mix MIS and dashboard integration: Quick view of logins, payouts, persistency innovation Market- l
Slide 19: Governance framework
Governance framework Board of Directors Profitable Independent and experienced Board growth Committees Corporate Board Risk Policyholder Nomination & Stakeholders’ Audit Investment Social With Profits Management Protection Remuneration Relationship Committee Committee Responsibility Committee Commit
Slide 20: Financial risk management framework
Financial risk management framework Natural hedges Product design & mix monitoring ▪ Protection and longevity businesses ▪ Prudent assumptions and pricing approach ▪ Unit linked and non par savings products ▪ Return of premium annuity products (>95% of annuity); Average age at entry ~60 years ▪ Defe
Slide 21: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension AUM, Rs Bn. HDFC International Life and Re 138.9 82.7 51.6 11.6 Mar'17 Mar'19 Mar'20 Dec'20 Fastest growing PFM (Pension Fund Manager) under the Registered growth of 109% in gross reinsurance premium in NPS architecture (YoY growth o
Slide 22: Managing Covid-19
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 3 Managing Covid-19
Slide 23: Dynamic approach to manage impact of the COVID-19 outbreak
Dynamic approach to manage impact of the COVID-19 outbreak Accelerated digital selling Focus on selling products with end to end digital customer journeys Digital servicing Communication to customers about digital touch-points for claims, renewal collection and customer queries Employee engagement/
Slide 24: Emphasis on 'digital' across customer touch-points
Emphasis on ‘digital’ across customer touch-points New business / Customer Employee / Partner Policy servicing purchase interactions engagement ▪ Digital sales journey - End-to-end ▪ Renewal collections - ~87% of renewal payments (95% of policies) ▪ Seamless support experience - ▪ e-learning platfor
Slide 25: Customer Insights
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 4 Customer Insights
Slide 26: Customer Insights – A shift towards digital platforms
Customer Insights – A shift towards digital platforms 70% customers surveyed Rising consumer confidence in digital platforms is reflected in for a study, across age terms of preferred channels for insurance-related information groups, showed increased confidence in purchasing policy via digital plat
Slide 27: Customer Insights – Customer Behaviour/Preferences
Customer Insights – Customer Behaviour/Preferences Top reasons to buy Life insurance Customer behaviour / trend 2019 rank 2013 rank The future intent to buy Life Insurance is the Protect family in case of death 1 1 highest amongst financial products driven To secure child’s education/marriage 2 2
Slide 28: Annexures
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 5 Annexures
Slide 29: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (9M FY21) 91 93 89 85 85 89 77 77 78 80 73 76 68 67 69 69 67 65 Actuarial 53 47 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (9M FY20) 92 89 86
Slide 30: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 0.52 0.33 0.08 0.25 14.07 14.08 Actuarial Financial 9M FY20 Impact of higher Change in New Business 1 Fixed cost 9M FY21 APE assumptions Profile absorption NBM% 26.6% 0.0% -0.6% 0.1% -0.5% 25.6% ESG 1. Reflects the impact of difference in mix of segment/distribution ch
Slide 31: Sensitivity analysis – H1 FY21
Sensitivity analysis – H1 FY21 Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -0.9% -1.5% Actuarial Reference rate Decrease by 1% 0.2% 0.7% Equity Market Decrease by 10% -0.1% -1.3% movement Increase by 10% -0.3% -0.7% Persistency (Lapse rates)
Slide 32: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt:Equity 61:39 62:38 71:29 64:36 UL:Traditional 54:46 50:50 43:57 44:56 109 384 Actuarial 16% 18% 21% 1% 30% 1,750 1,550 211 -20% 1,350 1,150 -70% 88 Financial 950 1,656 -120% 750 1,272 1,066 1,256 79 550 -170% 350 85 41 150 -
Slide 33: Stable capital position
Stable capital position Rs Bn. Dividend paid 3.3 4.0 - - NB premium growth 32% 32% 15% 11% 202% 210% 192% Actuarial 120.0 188% 184% 190% 100.0 89.0 170% 70.8 150% 80.0 62.7 23.0 52.1 Financial 13.1 130% 60.0 12.7 22.0 19.2 110% 11.3 40.0 16.7 13.6 90% 20.0 44.0 38.5 33.3 70% 27.2 ESG - 50% Mar 31, 2
Slide 34: Governance - Promoting responsible behavior
Governance - Promoting responsible behavior Governance structure Information / Cyber Security Risk Management and BCM Corporate governance policy ISO 27001:2013 and ISMS Risk management policy assessment program; Risk oversight by Senior Management & Board diversity policy o Independent au
Slide 35: Social initiatives - Culture of care and giving
Social initiatives - Culture of care and giving Inclusive growth Customer centricity Swabhimaan, the Corporate Social Responsibility wing is Improve lives with products designed to suit the different aligned with the UN Sustainable Development Goals (SDGs) life stage needs with focus on Educatio
Slide 36: Social initiatives – Human Capital Development
Social initiatives – Human Capital Development Attracting talent Employee engagement Talent management/retention Virtual hiring and on-boarding process Online yoga, mindfulness / meditation Fast track growth path for special without compromising on quality sessions, fitness challenges (Walkath
Slide 37: Environmental initiatives - Creating a better environment
Environmental initiatives - Creating a better environment Energy and Water Digitization Waste Management Energy efficiency and water Reduction of Paper Usage Segregation and proper disposal of conservation initiatives waste - dry and wet o Use of 3/5 star rated appliances Online /e-forms for c
Slide 38: India Life Insurance
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 6 India Life Insurance
Slide 39: Growth opportunity: Under-penetration and favourable demographics
Growth opportunity: Under-penetration and favourable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2019) (2019) 18.3% 16.5% 8,979 India remains vastly under-insured, both in terms of penetration and density Huge opportunity to penetrate the 6.7% 4,129 6.0% 3,244 2,691 u
Slide 40: Low levels of penetration – Life protection
Low levels of penetration – Life protection 172 mn 68 mn 1.7 mn Protection gap 2 (2019) 83.0% 76.0% 74.0% 71.0% 70.0% India has the highest protection gap in 61.0% 55.0% 55.0% 54.0% the region, as growth in savings and 41.0% life insurance coverage has lagged behind economic and wage growth Prot
Slide 41: Macro opportunity – Retiral solutions
Macro opportunity – Retiral solutions India’s pension market is under-penetrated at Improvements in life expectancy will lead to an average post 4.8% of GDP retirement period of 20 years Pension Assets / GDP Ratio Life expectancy at age 60 130.7 22 22 120.5 20 19 18 18 17 16 56.4 60.8 43.2 4.8 India
Slide 42: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs Cr 27% 22% 29% 35% 35% 73% 78% 71% 65% 65% FY17 FY18 FY19 FY20 9MFY21 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 2,02,575 <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 7,27,835 Total 5,28,045 6,78,109 5,86,941 6,82,000 9,30,410 Auctio
Slide 43: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 25% 22% 18% 18% 3% 8% 11% 16% 12% 13% 19% 18% 21% 26% 17% 52% 68% 65% 65% 16% 67% 50% 56% 47% 48% 32% 35% 35% FY10 FY13 FY16 FY19 FY10 FY13 FY16 FY20 Financial savings Physical savings Currency & depos
Slide 44: Industry new business trends
Industry new business1 trends Sensex Private Players LIC 420 401 357 315 304 Individual WRP in Rs bn 288 292 285 287 291 281 273 278 269 262 230 245 227 214 203 208 198 200 Sensex 175 178 172 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 9M FY21 Private players 57% 52% 46% 37% 38% 38%
Slide 45: Private industry: Product and distribution mix
Private industry: Product and distribution mix Product mix 1 Distribution mix 2 Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business Unit Linked Conventional 65% 57% 9% 10% 10% 12% 14% 56% 3% 16% 18% 54% 5% 4% 52% 51% 51% 3% 3% 3% 3% 48% 49% 49% 3% 3% 3% 3% 46
Slide 46: Appendix
Appendix
Slide 47: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) 9M FY21 9M FY20 Growth FY20 FY19 FY18 CAGR Rs Bn. New Business Premium (Indl. + Group) 135.5 121.5 11% 172.4 149.7 113.5 23% Renewal Premium (Indl. +Group) 121.3 99.4 22% 154.7 142.1 122.1 13% Total Premium 256.7 220.9 16% 327.1 291.9 235.6 18% Individual APE
Slide 48: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) 9M FY21 9M FY20 FY20 FY19 FY18 Overall New Business Margins (post overrun) 25.6% 26.6% 25.9% 24.6% 23.2% (1) Operating Return on EV 18.3% 19.0% 18.1% 20.1% 21.5% Operating Expenses / Total Premium 12.1% 13.7% 13.1% 13.1% 13.5% Total Expenses (OpEx + Commissio
Slide 49: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. 9M FY21 9M FY20 9M FY21 9M FY20 Premium earned 256.7 220.9 Income Reinsurance ceded (4.2) (3.3) Interest and dividend income 3.2 2.7 Income from Investments 266.6 69.2 Net profit/(loss) on sale 0.6 0.9 Other Income 1.0 1.1 Transfer
Slide 50: Balance sheet
Balance sheet Dec 31, 2020 Dec 31, 2019 Mar 31, 2020 Rs Bn. Shareholders’ funds Share capital (including Share premium) 24.8 24.1 24.2 Accumulated profits 56.1 42.6 45.7 Fair value change 2.3 (0.1) (1.9) Sub total 83.2 66.6 68.0 Borrowings 6.0 - - Policyholders’ funds Fair value change 27.4 9.7 0.5
Slide 51: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) 9M FY21: 25.1 (9M FY20: 17.0) 9M FY21: 35.7 (9M FY20: 37.5) 12 UL 37 UL 37 12 Par 33 42 36 Par 18 Non-par Health 32 23 33 Non-par Health 17 36 Non-par Savings 39 12 Non-par Sav
Slide 52: Summary of Milliman report on our ALM approach
Summary of Milliman report on our ALM approach Scope of review Portfolios reviewed • Assess appropriateness of ALM strategy to manage Portfolio 1: Savings and Protection – All non-single premium interest rate risk in non-par savings business non-par savings contracts and group protection products
Slide 53: Indian Embedded value: Methodology and Approach (1/2)
Indian Embedded value: Methodology and Approach (1/2) Overview Indian Embedded Value (IEV) consists of: Adjusted Net Worth (ANW), consisting of: – Free surplus (FS); – Required capital (RC); and Value of in-force covered business (VIF): Present value of the shareholders’ interest in the earnings
Slide 54: Indian Embedded value: Methodology and Approach (2/2)
Indian Embedded value: Methodology and Approach (2/2) Components of Value in-force covered business (VIF) Present value of future profits (PVFP): PVFP is the present value of projected distributable profits to shareholders arising from the in-force covered business determined by projecting the sha
Slide 55: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Dec 31, 2020 As at Dec 31, 2019 As at Dec 31, 2020 As at Dec 31, 2019 1 3.54 5.55 3.48 5.40 2 4.63 6.30 4.00 5.75 3 5.55 6.87 4.47 6.05 4 6.26 7.23 4.87 6.28 5 6.79 7.43 5.21 6.46 10 7.80 7.52 6.25 6.86 15 7.65 7.47 6.65
Slide 56: Glossary (Part 1)
Glossary (Part 1) APE (Annualized Premium Equivalent) - The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups Backbook surplus – Surplus accumulated from historical business written Conservation ratio - Ratio of current year renewal premi
Slide 57: Glossary (Part 2)
Glossary (Part 2) Operating expense - It includes all expenses that are incurred for the purposes of sourcing new business and expenses incurred for policy servicing (which are known as maintenance costs) including shareholders’ expenses. It does not include commission. Operating expense ratio -
Slide 58: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute an offer or invitation to sell or the solicitation of an offer or invitation to purchase any securities (“Securities”) of HDFC Life Insurance Company Limited (formerly HDFC Standard Life Insurance Company Limited)
Slide 59: Thank you
Thank you foal od inks i: HDFC Life
HDFC Life Insurance Company — 9M FY21 Earnings Presentation on 6ix